Thread: Archive Latest News - Think Tank - 16/08/07 - 03/11/07

Private sector growth top priority for Iraq

Thursday, 06 September 2007

Iraq's development "will not be realised without the active participation of the private sector," Iraqi Industry minister Fawzi Hariri told delegates at the Iraq Oil, Gas, Petrochemical and Electricity (IOGPE) summit held in Dubai last week.

Hariri was emphatic about encouraging both local private sector investment and foreign interest in Iraq.

"Our vision for the future of Iraq's industry is crystal clear. Partnership with the private sector is the way forward and there will be no looking back." Last year 19 new cement factories were licenced in an initiative aimed at drawing private sector investors into the construction industry.

John Lyons, senior consultant in the US Embassy's Iraq Reconstruction Management Office told Arabian Business that the project is worth US$4bn and is "the largest private sector initiative in Iraq."

The cement factory project is also designed to entice foreign investors to act as strategic partners to local companies to provide the skills and technology lacking in Iraq. According to Lyons, several European companies have already shown an interest including Swiss company Holcim, German company KHD Humboldt and French company Lafarge.

He added that cement is a "no-brainer" when it comes to investing in Iraq. The 25 million tonnes of cement a year needed by the country is far from being met at current production rates. Opportunities for those willing to negotiate Iraq's fragile security environment are potentially lucrative, but currently there is no privatisation law.

Private sector growth top priority for Iraq - Public Sector - ArabianBusiness.com

Turkey to develop Iraqi gas

by Reuters
Thursday, 06 September 2007

Turkey's pipeline company Botas aims to develop gas fields in northern Iraq to strengthen supplies for the Nabucco pipeline project, general manager Saltuk Duzyol said on Wednesday.

"As soon as the new petroleum law is enacted (in Iraq) there could be new opportunities to do business there ... The aim is to have Iraqi gas in the Nabucco," Duzyol told Reuters on the sidelines of an energy conference.

Two gas fields near Kirkuk have proven to hold 500 billion cubic metres each, Duzyol said.

A new oil law is expected to regulate Iraq's rich energy reserves, although Iraqi officials said this week the country's parliament would have to overcome major disagreements before the legislation can pass.

The United States has supported development of Iraq's gas infrastructure and has been pushing for Iraqi gas export to Europe. Analysts say the move is an attempt to sideline Iran, which has some of the largest proven gas reserves in the world.

The 4.6 billion euro ($6.25 billion) Nabucco project has been conceived as a route to diversify energy resources to Europe, as the continent's gas demand is set to soar in coming years.

Botas is positive about the participation of German firm RWE as the sixth shareholder in the Nabucco project.

"RWE is very eager to join Nabucco and we are very positive about their participation," Duzyol said.

Turkish officials earlier said the country favoured RWE as the sixth partner rather than Gaz de France after France's National Assembly passed a bill making denial of Armenian genocide at the hands of Ottoman Turks a crime.

Turkey denies there was systematic genocide against Armenians during World War One.

The sixth Nabucco partner to join a group of companies from Austria, Hungary, Bulgaria, Romania and Turkey will not be chosen before the end of this month, Duzyol said.

One of the problems that had slowed the new partner's selection has been a post-election reshuffling on the Botas board.

"There is still political support and there is support for a sixth shareholder, but we have not had a third board member since July," said Duzyol. He did not say when the third member was to be selected.

The second tender for the sale of Turkey's natural gas distribution grids will take place after the remainder of the first tender is finalised but will not happen before the end of this year, Duzyol said.

The first tender sold off 16 lots of the infrastructure to Royal Dutch Shell and Bosphorus Gas, which is partly owned by Gazprom. A remaining 12 lots to be finalised in the tender are expected to be transferred to Turkish firms Enerco and Avrasya.

Turkey is selling off its domestic distribution infrastructure after a new law said Botas had to cut its ownership of gas contracts to below 20% of national consumption by the end of 2009.

Turkey to develop Iraqi gas - Energy - ArabianBusiness.com

Study: U.S. should lower profile in Iraq

Posted 21m ago

WASHINGTON — A panel of retired senior military and police officers recommended Thursday that the United States lighten its footprint in Iraq to counter the image that it's an "occupying force."

The panel said significantly reducing the number of U.S. troops and allowing Iraqi forces to take over more daily combat missions by early next year would be "possible and prudent."

Study: U.S. should lower profile in Iraq - USATODAY.com

Iraq PM discusses filling government posts with top cleric

Wed Sep 5, 2007

NAJAF, Iraq (Reuters) - Prime Minister Nuri al-Maliki met on Wednesday with the reclusive leader of Iraq's Shi'ite majority, Grand Ayatollah Ali al-Sistani, to discuss a government crisis in which nearly half his cabinet has quit.

Sistani is the sponsor of the prime minister's ruling United Alliance and rarely leaves his home in the holy Shi'ite city of Najaf in southern Iraq.

Speaking after the meeting, Maliki told reporters he had come to Najaf to seek Sistani's advice on filling empty ministerial posts and to get his thoughts on the possibility of reforming the government.

"I discussed with him the case of the government. I asked his help in forming a government and nominating new ministers, or if there is the possibility to form a new government based on technocrats," he said.


Maliki did not say how Sistani responded, and the cleric's office declined to comment.

One of the biggest blocs in the United Alliance, the movement of fiery Shi'ite cleric Moqtada al-Sadr, pulled out of the government in April in protest at Maliki's refusal to set a timetable for a U.S. troop timetable.

The biggest Sunni Arab bloc in parliament, the Accordance Front, has also pulled out its ministers, accusing Maliki of sectarianism.

The walkouts have dealt a blow to efforts to bridge the deep divide between Iraq's Shi'ite and Sunni Arab communities and reach agreement on laws seen by Washington as vital to fostering national reconciliation.

Amid calls by some Democrats in Washington for his ouster, Maliki is under growing pressure to show political progress to match the military gains that have been made in certain areas.

Maliki also said he was considering a proposal to declare Iraq's holy cities, which are home to some of the most important shrines in Shi'ite Islam, weapons-free zones, with only the military entitled to be armed.

"I am considering that holy shrines and sacred cities be peaceful places and disarmed of weapons and under the protection of the Iraqi army," Maliki said, without elaborating.

The proposal follows fierce fighting near the Imam Hussein and Imam Abbas shrines in Kerbala last week in which dozens of people were killed. The fighting disrupted a major religious festival and forced hundreds of thousands of pilgrims to flee.

The gun battles appeared to involve Sadr's Mehdi Army militia and the Supreme Iraqi Islamic Council, a rival Shi'ite faction whose armed wing controls police in much of the south.

http://today.reuters.com/news/articl...KI-SISTANI.xml

Iraqi MP: KRG oil law didn't help

Posted : Thu, 06 Sep 2007

A top Iraqi parliamentarian said the Iraqi Kurdistan approval of a regional oil law set back the debate over a federal law.

Abdul-Hadi al-Hasani, deputy chair of the Parliament's Energy Committee, said the deals the Kurdistan Regional Government signed with oil firms could be overturned by the federal government.

Iraq's federal oil law has been held up by disputes over the extent of federal control over the oil sector and what role the private sector would play.

The Kurds, in the relatively peaceful north, have been urging movement as they try to capitalize on four plus years of economic development. They have signed a handful of oil deals with smaller, private firms, which raised ire in Baghdad, sparking threats from the Oil Ministry they wouldn't be honored. Last month the KRG grew weary of waiting for Baghdad and approved its own version of a regional oil law, saying it would be in line with a version of the federal law the KRG agreed to in February.

"It did not help as much as hindrance," Hasani said on the sidelines of the Iraq Oil, Gas, Petrochemical and Electricity Summit organized by the London-based Iraq Development Program. "We need one constitution, one law over everybody. It could wait and then we could see and then they could adopt the law which everybody had agreed on."

Hasani claims the federal government has the right to void the KRG contracts, though that would likely make matters worse in terms of the investment scene in Iraq.

Sami al-Askari, parliamentarian and top adviser to the prime minister, said a federal oil and gas council that the law forms would decide whether to scrap the KRG deals.

Both parliamentarians said the private firms that signed deals with the KRG should not be blocked from winning contracts for the rest of Iraq.

Iraqi MP: KRG oil law didn't help : World

Analysis: Iraq to privatize electricity

Published: Sept. 6, 2007

DUBAI, United Arab Emirates, Sept. 6 (UPI) -- Two of Iraq’s many needs right now are more electricity and more investment. A law being drafted could satisfy both, paving the way for foreign and domestic private companies to build power plants, a step toward fully privatizing the electricity sector.

“It should be short coming,” a senior U.S. official working in Baghdad on Iraq’s electricity sector told United Press International on condition of anonymity on the sidelines of an Iraq energy conference.

A top legal adviser is working on it with the Electricity Ministry, the source said, adding it “could be” before Parliament before the year’s end.

Others UPI spoke to refused to go on the record but confirmed the law was being worked on in a parliamentary committee as well, with the help of another U.S. official in Baghdad.

“Yes, we have plans for privatization,” Iraq Electricity Minister Karim Waheed Hasan told UPI. “We have two projects which should be under execution very soon. We are planning to announce many stations, many power plants.”

Earlier this year Iraq’s Parliament approved an oil refinery investment law that gave special terms to the private sector to build refineries. Iraqis suffer from a fuel crisis largely associated with a lack of refining capacity.

The oil refinery law is the first step in a long walk toward fully privatizing the downstream oil sector, Oil Minister Hussain al-Shahristani told UPI after the law was passed. Many in Iraq’s government, to some extent, are keen on splitting open the long-nationalized upstream sector as well.

The electricity law hasn’t been made public, and details are unclear. Hasan said he hopes two power plants will be completed by next year and “in the future, yes,” the entire sector will be privatized.

“I think there is nothing to stop having it privatized but still it needs more legal framework in order to get the satisfaction and assurances for the investor to go in this sector,” said Ali al-Dabbagh, an Iraqi government spokesman.

Iraqis suffered through the summer heat with little power -- and what they got was inconsistent -- to power fans and air conditioners. (Backup generators were hostage to the fuel shortage.) Electricity generation reaches about 40 percent to 50 percent of demand, Hasan said during a presentation at the Iraq Oil, Gas, Petrochemical and Electricity Summit, organized by the London-based Iraq Development Program, though the sector has more capacity than demand.

Baghdad and Irbil provinces receive less than eight hours of power a day, while only Diyala and Dohuk provinces receive more than 16 hours, according to the presentation. Throughout the summer, however, regular reports from Iraq told of days on end without electricity.

Insurgents target the electricity sector, especially the towers and lines running between cities. From April 2003 through the third week of August 2007, at least 318 electricity sector workers were attacked, according to an expert in threats and vulnerability to the energy sector ********* who spoke on the condition of anonymity. There were also at least 166 attacks on power lines and towers, stations and generators and substations. The expert cautioned that the numbers were likely very low, considering the number of incidents that aren’t reported.

Also keeping electricity from Iraqis is the inability to power the power stations. Iraq as a whole suffers from a fuel shortage, and the electricity sector is no exception. Two-thirds of the natural gas Iraq produces, mostly as a side product to pumping oil, is flared off as waste because there’s no infrastructure to send it anywhere that could use it, such as a power station.

Pipelines are also a frequent target of attack, cutting the supply of oil some power plants run on.

To fix this, Hasan is promoting his “master plan,” which will quadruple the per capita consumption of electricity in Iraq (by giving more people more access to more power) by 2009 and increasing generating capacity by 60 percent by 2015. This would cost $25 billion, Hasan estimated.

But electricity and the oil sector are mutually dependent, since electricity is needed to power the refineries and pipelines and other aspects of the oil sector.

Kamal Field al-Basri, senior economic adviser to Iraq’s prime minister and executive director of the Iraq Institute for Economic Reform, estimates the oil sector, hit by decades of abuse, misuse and sanctions, requires $56 billion to fully stand on its own feet.

Iraq’s oil sales are the biggest earner for the country, making up more than 60 percent of the gross domestic product and funding more than 90 percent of the federal budget last year. But in a war zone, with more than 50 percent living in poverty and nearly that many unemployed, and a lack of quality-of-life services, the money is tight.

Many are looking outside Iraq for the funds.

“Iraq cannot generate the required investment internally, but we’re looking for international support for that,” Basri said. “We can satisfy about 42 percent of that need internally, but the rest we need from the international side” through grants, loans and other investment.

Not everyone agrees on what form that should take. Even the powerful and strongly nationalistic oil unions, which have vowed to defeat a proposed oil law because it gives too much to the private sector, say limited private investment is necessary.

There are many parties interested in keeping the oil sector nationalized but more willing to let the free market into other areas of the economy.

And then there's the United States, which, since the days of the Coalition Provisional Authority, has been helping Iraq reform its economy.

“There is some suggestion that we want to privatize and we are transferring from central government to market economy, which is needed,” said Abdul-Hadi al-Hasani, deputy chairman of the Energy Committee in Iraq’s Parliament. He said the electricity bill is "in the draft process.”

United Press International - International Security - Energy - Analysis

Sharp drop in demand for dollar in daily auction

Demand for the dollar was sharply down in the Iraqi Central Bank’s auction on Wednesday, reaching $70.450 million compared with $108 million on Tuesday.

In its daily statement the bank said it had covered all bids, including $14.910 million in cash and $55.540 in foreign transfers, at an exchange rate of 1,237 dinars per dollar, unchanged from yesterday.

None of the 18 banks that participated in Wednesday's session offered to sell dollar.

In statements to the independent news agency Voices of Iraq (VOI), Ali al-Yasseri, a trader, said that the stable exchange rate led to a sharp drop in remittances in Wednesday's session bringing down the overall demand for the dollar.

The Iraqi Central Bank runs a daily auction from Sunday to Thursday.

Sharp drop in demand for dollar in daily auction | Iraq Updates

Iraqi official: Oil security not partisan

A top Iraqi security official disagrees with allegations Basra’s political leadership’s militia has infiltrated the Basra Oil Protection Force.

Issa Jaffar Jabir, director general of the Ministry of National Security Affairs, said at an Iraq energy conference there is no proof militias have infiltrated the force at the behest of the government in Basra.

Jabir, at the Iraq Oil, Gas, Petrochemical and Electricity Summit organized by the London-based Iraq Development Program, told reporters the “accusations” were “not fair.”

The Fadhila Party is currently in control of Basra, Iraq’s oil capital, where most of Iraq’s 115 billion barrels of oil reserves are and nearly all the 1.6 million barrels per day are exported. Since winning government in provincial elections the governor, Mohammed Waili, has been accused of stacking key leadership roles with his party members, including the police and the Oil Protection Force, which guards the oil infrastructure.

“It’s true that the governor of Basra belongs to this party, but we cannot accuse an Iraqi official randomly,” Jabir said. He admitted some political parties, not just Fadhila, have been able to “penetrate” ministries of interior and defense, the security apparatus and facilities guards.

“We started strongly to purge forces regardless of their parties and names,” he said.

Iraqi official: Oil security not partisan | Iraq Updates

Iraq fuel cost, public services entwined

Iraq needs to stop subsidizing its fuels but step up quality of life services to citizens, a top government adviser said.

Kamal Field al-Basri, senior economic adviser to Maliki and executive director of the Iraq Institute for Economic Reform, told UPI on the sidelines of an Iraq energy summit that fuel subsidies are too subjective to benefit the entire country.

Fuels subsidies are “not distributed equally, they benefit only those who have a car, not the poor,” Basri said at the Iraq Oil, Gas, Petrochemical and Electricity Summit organized by the London-Based Iraq Development Program.

He said the funds dedicated to subsidizing fuels could be best used in other sectors “that can improve the standard of living … ho****als and things like that.”

“In 2005 the total value of the subsidies that the government gives to fuels amounted to $809 billion, which is a huge amount,” he said, adding it would be a strike against the growing fuels black market. “That explains why we have smuggling of fuel to neighboring countries. The government is committed to reform on these issues.”

Iraq has long subsidized transportation, heating and cooking fuels, but two years ago began phasing them out as part of an agreement with international creditors, the International Monetary Fund and World Bank.
He said the goal is to price Iraqi fuels the same as those bought in other countries in the area.

When asked about reports that the finance minister wants to curb the pace of subsidy removal next year, Basri said, “Unfortunately, when we implemented the reform, the situation deteriorated with respect of public services.

“We cannot do this reform in isolation of the other services. So fuel becomes expensive and any other expenses become hard for government. So it affects the standard of living dramatically so the rate of the poverty increased because of this,” he said. “So we need to do two things: reform and parallel to this, increasing the public services to the populations.”

Iraqis suffer from 54 percent poverty and 20 percent unemployment, Basri said. Other Iraqi and U.S. figures put Iraq’s unemployment at two to three times higher.

They also largely lack basic services like regular electricity and clean water, mixed with a deteriorating healthcare and educational system, and the violence that has engulfed the country since the war began.

Iraq fuel cost, public services entwined | Iraq Updates

DNO up on Iraqi oil law hopes

Shares in DNO ASA rose in afternoon trade, outperforming a marginally stronger market, on hopes that the all-important Iraqi oil law could be ratified sooner rather than later, dealers said.

At 1.20 pm, shares in DNO were up 0.17 nkr, or 1.61 pct, at 10.71, while the OSEBX benchmark index was 0.12 pct higher at 480.44.

At the time of its second-quarter results last month, DNO said it expected Iraq's new petroleum law to be ratified by the central government in Baghdad in September, having already been signed off by the Kurdistan Regional Government.

While analysts have said they are sceptical that the law will come into force as quickly as DNO hopes, Orion Securities this morning pointed out that once the law is passed, it will be a powerful share-price driver for DNO.

"We see an eventual oil law in Iraq as a big trigger for DNO," the broker said, de****e the "big risk of delays".

Additionally, Orion said, once the oil law is in place it believes there will be a rise in the number of companies willing to pay handsomely for DNO's Iraqi assets.

Last month DNO said it had rejected a 700 mln usd bid from an unnamed oil firm for its assets in Northern Iraq.

Orion has a 'buy' recommendation on DNO with a 12.7 nkr price target.

DNO up on Iraqi oil law hopes | Iraq Updates